In mid-November, the top echelons of China’s leadership met for the Third Plenum of the 18th Communist Party of China Central Committee, and introduced broad economic reforms that could have major impacts on China’s goal to drastically reduce CO2 emissions per unit of Gross Domestic Product (GDP).

In light of China’s overall economic expansion and the complexity of the country’s fuels market, it is difficult to predict which way these reforms will go, but easy to understand that the stakes are high.

China emits more greenhouse gases than any other nation. China’s per capita emissions are now higher than the global average and equal to or higher than some European countries. China burns nearly half of all the coal burnt globally and has the world’s largest automobile market. All of these factors contribute to air pollution events worthy of international headlines. Additionally, China’s relative lack of fresh water increases China’s vulnerability to the impacts of climate change, as recent droughts have shown.

When it adopted its 12th Five-Year Plan in March 2011 (covering 2011-2015), China signaled that addressing climate change would be a top priority. While China has so far resisted adopting an absolute cap on greenhouse gas emissions, the Plan set ambitious targets for reducing both energy intensity and carbon dioxide emissions per unit of GDP by 2015 and for increasing the share of non-fossil-fuel energy. Preliminary statistics show that the country is on track to meet some of these targets. Subsequent supplementary plans set goals for raising energy efficiency and capping energy and electricity consumption.

A key issue to watch will be the contributions of the Third Plenum reforms to these goals. For example, China’s current model for dispatching electricity from generation facilities, particularly coal power, is wasteful and should be adjusted so that the plants first deployed are the most economically and environmentally efficient. A more rational pricing method for fossil fuels consumption and more rigorous enforcement of environmental regulations would also help to utilize existing facilities more efficiently and should be pursued aggressively.

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China’s building sector, which at present is wasteful and inefficient, also needs reform. China is aiming to move 300 to 400 million people from rural to urban areas over the next 17 years, building an estimated 1,000 new cities to house them. Market incentives should be implemented to ensure that the millions of new buildings being built will be efficient and useful 30 years from now.

Further, as standards of living and incomes rise, and China moves away from its heavy export dependency and toward increased domestic consumption, its appetite for energy and the resulting CO2 emissions will continue to rise. Though the 12th Five-Year Plan aimed to cap GDP growth at 7 percent, China exceeded that rate in 2011 and 2012 and is on track to exceed the same goal in 2013, which could jeopardize China’s desire to cap total coal and energy consumption.

While most observers agree that GDP growth will remain the Party’s top priority for the foreseeable future, China appears to be taking these climate-related challenges seriously. Beijing is in the process of drafting a national climate change law. The 13th Five Year Plan, to be issued in 2015, may include a binding cap on greenhouse gas emissions. China is projected to build more renewable energy projects through 2035 than the United States, EU and Japan combined. Ultimately, however, China’s success will depend on the Party’s ability to reform the economy to achieve a truly sustainable growth model that continues to raise people out of poverty while accounting for the nearly unrestrained environmental degradation of the past.

William (BJ) Schulte is a U.S.-China partnership for environmental law LLM fellow ’15; Adam Moser, ’10, is assistant director for the partnership; Phoebe Youhanna is a Class of 2015 student at Vermont Law School.